Multiannual Financial Framework and Europe’s budget

Since 27 June 2013, the multiannual financial framework has been in place as the EU budget plan for the period 2014–2020. A total of almost 1000 billion euros is available for the different policy areas.

The distribution of the funds reflects the EU’s political goals. The EU has a total of 1083 billion euros (current prices) at its disposal for the current MFF. The current MFF includes more funding particularly for infrastructure, education, domestic affairs and combating youth unemployment than the previous MFF.

Financial Framework sets limits for EU budget

The EU budget is laid down in the annual budget procedure and has to remain within the annual limits of the MFF. The Federal Foreign Office represents the Federal Republic of Germany in the negotiations on the MFF. Most recently its priority was “better spending” rather than “more spending”, i.e. more efficient use of the funding available rather than a budget increase. In 2016 the MFF is due to be reviewed and adapted if necessary.

The EU finances its expenditure through what is known as its own resources. These are divided into

traditional own resources (e.g. customs duties),

own resource from value‑added tax and

own resource based on gross national income (GNI).

This is complemented by other sources of revenue, such as fines on companies for breaching competition law.

Germany, as a relatively large country, finances approximately 21% of the EU budget.

What is the EU funding used for (not just in Germany)?

The EU’s Multiannual Financial Framework for 2014–2020 is organised under six headings, which reflect the Union’s political priorities. The headings receiving the largest amounts of funding are labelled 1a, 1b and 2 in the first diagram (top of the page) – they stand for growth: education, research, infrastructure (1a), economic, social and territorial cohesion (1b) and sustainable growth: natural resources (2). Funds from these programmes also benefit Germany. Here are further details for the cases where this applies:

Heading 1a: Promotion of research, innovation and technological development

he heading “Competitiveness for growth and jobs” covers programmes which promote research as well as investment in education and training. These are the areas of spending for which Germany receives the highest financial returns, they amount to some 15% of total expenditure. This is partly because the principle of excellence applies in the field of promotion of research and innovation, and German institutions often write successful project applications. With an overall budget of nearly 70 billion euros, the research programme Horizon 2020 is being significantly expanded in comparison to the programming period 2007‑2013 (price base 2011). At the same time, EU funding rules for research are being made much simpler. In the future, part of researchers’ costs will be covered by a lump sum for which they will no longer have to submit accounting records.

The well-known Erasmus Programme will also be bolstered, with a full 13 billion euros (price base 2011) earmarked for it. This is good news for students, trainees, university staff, trainers and youth workers. In 2011/2012 in Germany 27,593 students took up the opportunity to go to another European country with an Erasmus grant, by the same token 21,217 students came to study in Germany. Furthermore, master’s students should soon be able to benefit from low cost student loans to help them undertake a full master’s programme abroad.

Heading 1b: For growth‑oriented regional aid

The heading promoting “economic, social and territorial cohesion” between the member states is geared towards reducing the divergences in levels of development in different regions of Europe. In Germany, the eastern German Länder in particular have greatly benefited from this in the past. They have since moved on from receiving maximum support, but will nonetheless continue to enjoy considerable funding in the future. These EU funds are particularly advantageous for Länder when coffers are running low, as they provide some financial leeway and allow for the strategy of smart, sustainable and inclusive growth to be pursued. This lays the groundwork for the promotion of industries such as tourism, for example by investing in monuments and culture. Vocational training in companies and start up assistance for the self-employed are particular priorities for Germany when it comes to apportioning funds from the European Social Fund.

The common agricultural policy is one of the oldest communitarised policy areas and thus one of the pillars of European integration. Therefore in the EU’s Multiannual Financial Framework for 2014‑2020 a great deal of funding (363 billion euros) is still being allocated to the heading “sustainable growth: natural resources”, even as its proportion of the EU budget is steadily falling. The most important instrument of agricultural policy is direct payments, which serve to guarantee income stability for farmers. They are no longer completely tied to the production of certain agricultural goods, but rather to the size of farms and their compliance with farming requirements. The amount allocated for direct payments per hectare differs greatly between member states. These divergences will be further reduced from 2014. The second pillar of agricultural policy, “Rural Development”, is above all an instrument aimed at mitigating regional imbalances and promoting overarching objectives such as sustainable management, competitiveness and research and innovation in agriculture.

Moreover, agriculture in the EU is set to become fairer and more environmentally friendly. The new agreement that EU agriculture ministers have reached is good news for smallholders, as from 2014 onwards, small farms will receive proportionally more funds than large farms. In addition to this, if small farms are run in an environmentally friendly manner, they could enjoy a comparatively large 11% of Germany’s financial returns from the agricultural section of the multiannual financial framework. Finally, from 2015, 5% of arable land should be reserved for nature, for example as fallow land or field margins. This should create space for wild animals to roam and help to preserve biodiversity.